Nvidia (NVDA) Stock: China Approves H200 Chip Sales to ByteDance, Alibaba, Tencent

TLDR

• China approved ByteDance, Alibaba, and Tencent to purchase over 400,000 Nvidia H200 AI chips combined
• The approvals came during Nvidia CEO Jensen Huang’s visit to China this week
• Beijing is attaching conditions to the approvals, which sources say are still being decided
• One source claims the licenses are too restrictive and customers aren’t converting approvals into actual orders yet
• Chinese tech firms previously ordered over 2 million H200 chips, far exceeding Nvidia’s available inventory

China made a move this week that caught many by surprise. Beijing approved three of its biggest tech companies to buy Nvidia’s H200 AI chips.

ByteDance, Alibaba, and Tencent received the green light to purchase more than 400,000 H200 chips in total. Four sources familiar with the matter shared this information with Reuters.

The timing lines up with Nvidia CEO Jensen Huang’s visit to China this week. One source said the regulatory approvals came during his trip.

NVIDIA Corporation, NVDA

The H200 represents Nvidia’s second most powerful AI chip. It delivers roughly six times the performance of Nvidia’s H20 chip, which was previously the most advanced chip Nvidia could sell to China.

Chinese tech firms had already placed orders for more than 2 million H200 chips. That number far exceeds Nvidia’s available inventory, according to previous reports.

Questions About Implementation

The approvals come with strings attached. The Chinese government is only granting them with conditions, though sources say those conditions are still being worked out.

One source painted a less optimistic picture. They said the licenses are too restrictive and customers aren’t yet converting the approvals into actual purchase orders.

Other firms are now joining a queue for subsequent approvals. The criteria Beijing is using to determine eligibility remains unclear. How many additional companies will receive approval in future batches is also unknown.

Chinese authorities previously told domestic tech companies they should only purchase chips when necessary. One proposal discussed in the past would require each H200 purchase to be bundled with a set ratio of domestic chips.

The Geopolitical Context

The H200 became a flashpoint in U.S.-China relations. Despite strong demand from Chinese firms, Beijing’s hesitation to allow imports had been the main barrier to shipments.

The U.S. formally cleared the way for Nvidia to sell the H200 to China earlier this month. Chinese authorities hold the final say on whether the chips can actually be shipped in.

Chinese customs authorities told agents earlier this month that H200 chips were not permitted to enter China. This latest development represents a reversal of that position.

Beijing appears to be walking a tightrope. The government wants to meet surging domestic demand for advanced AI chips. At the same time, it wants to nurture its domestic semiconductor industry.

Chinese companies like Huawei now have products that rival Nvidia’s H20 chip performance. They still lag far behind the H200.

The approvals suggest Beijing is prioritizing the needs of major Chinese internet companies. These firms are spending billions of dollars to build data centers for AI services. They’re trying to compete with U.S. rivals, including OpenAI.

Huang arrived in Shanghai last Friday for routine annual celebrations with Nvidia’s China employees. He has since traveled to Beijing and other cities.

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